MF Global's Corzine Faces New Scrutiny on Customer Accounts

Congressional investigators released details of emails from just before MF Global's bankruptcy that renew questions about whether anyone at the failed brokerage authorized the use of customer funds to cover an overdraft in London.

WASHINGTON - Congressional
investigators released details of emails from just before MF
Global's bankruptcy that renew questions about
whether anyone at the failed brokerage authorized the use of
customer funds to cover an overdraft in London.

Former MF Global official Edith O'Brien said in an October
2011 email that CEO Jon Corzine gave "direct instructions" to
transfer $200 million from a customer account to cover an
overdraft in its account at JPMorgan in London, according to a
congressional memo released on Friday.

The Oct. 28 email, written days before MF Global's collapse,
was quoted in a document released in advance of a House
Financial Services subcommittee hearing scheduled for next week
on the collapse of brokerage MF Global and the continued search
for missing customer funds. The committee this week subpoenaed
O'Brien to appear before the panel.

Steven Goldberg, a spokesman for Corzine, said that Corzine
has testified before Congress that he asked that the JPMorgan
Chase & Co overdraft be corrected, but never gave any
instructions to misuse customer funds.

"He never directed Ms. O'Brien or anyone else regarding
which account should be used to cure the overdrafts, and he
never directed that customer funds should be used for that
purpose," Goldberg said in an email on Friday.

Goldberg added that Corzine testified "he recalls having
received written material indicating that the funds used to cure
the overdrafts were appropriate for that purpose."

A representative for JPMorgan Chase was not immediately
available for comment.

O'Brien served as an assistant treasurer in the firm's
Chicago office.

She has not been accused of any wrongdoing. It was not known
if she might choose to invoke her right against
self-incrimination at the hearing next week.

MF Global filed for bankruptcy on Oct. 31 after it was
forced to reveal that it had made a $6.3 billion bet on European
sovereign debt, spooking investors and customers. Corzine
resigned as CEO days later.

A trustee liquidating the firm has estimated the customer
funds shortfall could be as high as $1.6 billion.

Congressional and regulatory officials have been
investigating whether customer funds were improperly transferred
in the chaotic days before the firm collapsed and what
executives knew about the status of various accounts.

The $200 million transfer from a customer fund account to
JPMorgan was made to cover a $175 million overdraft in one of MF
Global's accounts at the bank in London, the memo said.

The memo prepared by committee staff points out that
segregated customer accounts like the one in question can
contain funds that belong to the futures brokerage and can be
used for transfers.

The memo says, however, that JPMorgan chief risk officer
Barry Zubrow called Corzine directly to seek assurances that the
funds being transferred belonged to MF Global and did not
include customer funds.

The bank followed up with a letter requesting written
assurances that all MF Global transfers - "past, present and
future" - complied with Commodity Futures Trading Commission
rules about keeping customer money separate from the broker's
own, the committee staff said.

Laurie Ferber, MF Global Holding's chief lawyer, balked at
the request as being too broad and sought to narrow the written
assurance to include only the Oct. 28 transfer, the memo said.

MF Global employees drafted several versions of the letter
but the firm did not return one to JPMorgan before it collapsed.

The committee document says Corzine identified JPMorgan
Chase and Interactive Brokers as the parties "most interested"
in purchasing MF Global assets as he updated regulators of
efforts find a buyer.

Next week's hearing is the latest in a series of
congressional efforts to grill former senior managers of MF
Global.

Former Chief Executive Jon Corzine, Chief Financial Officer
Henri Steenkamp and Chief Operating Officer Bradley Abelow have
all testified to Congress, and denied any intent to misuse
customer funds and any specific knowledge of how that misuse may
have occurred.

None have been formally accused of any wrongdoing.
(Reporting By Alexandra Alper, Sarah N. Lynch and Ann Saphir;
Editing by Bernard Orr)